Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ News / India/  Exports excluded from new tax credit norms, clarifies finance ministry
BackBack

Exports excluded from new tax credit norms, clarifies finance ministry

Experts pointed out that the 1% cash payment requirement could lead to cash-flow-linked difficulties

The rule may be applicable to 40,000-45,000 tax payers (Photo: Pradeep Gaur)Premium
The rule may be applicable to 40,000-45,000 tax payers (Photo: Pradeep Gaur)

NEW DELHI : Export turnover is exempt from a new rule that prevents businesses from fully meeting their tax liability using tax credits, a finance ministry official clarified on Sunday.

The clarification comes after experts pointed out that the requirement of paying 1% of the total tax outgo in cash by businesses with 5 million sales per month could lead to cash-flow-related difficulties for some. It also comes in the wake of traders registering their protest against the rule that is effective from 1 January.

Sale proceeds of items exempt from the goods and services tax (GST) are to be excluded while computing the 5 million sales threshold for 1% cash tax payment, said the official.

The government’s idea is to step up GST compliance and nail fake invoice rackets by forcing a part of the payment in cash. Those engaging in providing bogus invoices (providing invoices without supplying goods) choose items with limited value addition so that there is no need for any cash payment of tax and the entire tax liability is met by bogus credits. The 1% cash payment of tax is meant to address this. The rule is expected to apply to 40,000-45,000 tax payers, according to finance ministry estimates.

“This provision is a very smart rule against fraudsters and will not affect genuine business entities or the ease of doing business in any manner," the official mentioned above said. GST authorities had held a nationwide drive against fake invoices from mid-November. This has so far led to the arrest of over 175 people including five chartered accountants and more than 1,800 cases against 8,000 entities, the official said.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

ABOUT THE AUTHOR
Gireesh Chandra Prasad
Gireesh has over 22 years of experience in business journalism covering diverse aspects of the economy, including finance, taxation, energy, aviation, corporate and bankruptcy laws, accounting and auditing.
Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 27 Dec 2020, 12:57 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App